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Tax warning for 'middle' families

Experts have warned that middle income families will be hardest hit by the Government's changes to the tax system.

Changes to tax credits and child benefit will see families earning between £40,000 and £50,000 facing a "considerable increase" in their tax burden, according to the Chartered Institute of Taxation.

The institute also suggested that the measures will mean bad news for manufacturers, oil companies and banks.

A considerable number of households are already in the below-average income bracket as the sole earner is a higher-paying taxpayer, the group indicated.

It said: "The effective freezing of the higher-rate threshold, the proposed withdrawal of child benefit from households containing a higher-rate taxpayer, and the reductions in working tax credit - particularly the childcare element - will result in those households falling further down the income distribution."

It warned that these changes would lead to middle-income households being "squeezed" proportionately more than those on higher incomes who did not receive tax credits.

The group added that taking low-income households out of the income tax net by raising the personal allowance would not necessarily make their households better off, once their loss of housing benefit and council tax benefit were also taken into account.

Copyright © Press Association 2011

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